Statement by the European Commission, ECB and IMF on the review
mission to Greece
European Commission - MEMO/14/202 19/03/2014
EUROPEAN COMMISSION
MEMO
Brussels, 19 March 2014
Statement by the European Commission, ECB and IMF on
the review mission to Greece
Staff teams from the European Commission (EC), European Central Bank (ECB), and
International Monetary Fund (IMF) have concluded their review mission to Greece. The
teams have reached staff-level agreement with the authorities on policies that could serve as
the basis for completion of the review.
The mission and the authorities agreed that the economy is beginning to stabilise and is
poised for a gradual resumption of growth, broadly in line with our previous projections.
Prices are adjusting and inflation remains well below the euro area average.
Fiscal performance is on track to meet program targets. Preliminary estimates suggest the
2013 primary balance target was met with a substantial margin. While only a small portion of
this over-performance will carry over into 2014, we believe that the 2014 fiscal targets will
also be met, taking into account the measures being implemented and planned. The
authorities reconfirmed their commitment to implement policies needed to achieve the 2015
primary surplus target of 3 percent of GDP, including as needed by extending expiring fiscal
measures, such as the solidarity surcharge.
The authorities are making progress on structural reforms to improve the growth potential
and flexibility of the Greek economy and help create a fairer and more supportive
environment for investment, growth, and job creation. They are committed to implementing a
very large majority of product market reforms identified by the recent OECD study in the
areas of food processing, tourism, building materials, and retail; to taking concrete measures
to liberalise the transport and rental markets and open up closed professions; and to reducing
social security contribution rates and nuisance taxes. Notwithstanding delays, progress is also
being made in reforms of the public administration, which should reduce the burden of red
tape and improve the quality of public services to the Greek people. Labour market reforms
are behind schedule, but the authorities are committed to implementing them gradually in the
remainder of 2014. Competitiveness will be further enhanced by energy market reforms, such
as the rationalisation of pricing policies to ensure adequate cost recovery and avoid hidden
subsidies, the split of the Public Power Company into two entities ahead of privatisation, and
the launch of a fundamental reform of the gas market. The authorities also agreed to
revitalize the privatisation of other corporate and real estate assets, which would provide
needed financing to the state while unlocking investment.
Alongside these structural reforms, the authorities are continuing their efforts to strengthen
the social safety net to cushion the impact of the economic downturn. Notably, programmes
to hire youth and unemployed workers under programmes financed by EU structural funds
will be expanded, and a minimum income guarantee programme is being launched on a pilot
basis in two municipalities with the aim of rolling it out on a phased-in national basis in
2015.
The authorities are committed to taking all necessary actions to ensure that banks remain
healthy and adequately capitalised and are in a position to support the economic recovery.
We take note of the stress test results and attendant capital needs estimates by the Bank of
Greece. However, according to the assessment of the mission teams, there are upside risks to
the capital needs estimates, in particular, if the authorities and banks do not urgently and
efficiently address the high level of non-performing loans. Swift recapitalisation of banks
will strengthen their balance sheets. The envisaged injection of fresh private capital into the
Greek banks is a sign of confidence and will help to strengthen the private management of
Greek banks. The Bank of Greece should remain vigilant in its oversight of the banking
system and proceed forcefully in requiring banks to quickly work out their large stock of
problem assets. The authorities are also committed to significantly strengthening the private
sector debt resolution framework and facilitating the orderly and swift workout of impaired
bank assets. The buffers in the Hellenic Financial Stability Fund will be retained to meet
future adverse contingencies.
The Eurogroup and the IMF’s Executive Board are expected to consider approval of the
review in the coming weeks.